Danger: 6 Pitfalls to Avoid When Investing

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Written by Paul Obika

Published: 12 December 2017

Here’s the thing, if you want to be rich, you can’t depend solely on your income.

With ever growing bills and expenses and the continuous i***ations of commodity prices, one cannot be rich if the only source of income merely depends on the salary. If you can barely provide enough for your needs, then how can you be able to set aside enough money for your retirement?

Many people who want to get the most out of their money for their future are venturing into investing in the stocks market. Investment in stocks market has been seen to provide high potential of returns. When managed properly, investing in stocks can be a great way to let your money work for you,instead of you working hard to earn your money. It is considered to be one of the best ways to accumulate wealth and prepare for retirement.

On the downside though, stocks investmentis not without risks.Itrequires skills and proper management. Hence, as it is said investing is not about working harder, it’s about working smarter. Many investors are failing because they lack the right knowledge and understanding needed to thrive in the stocks market.

Here are the top 6 pitfalls to avoid when you want to engage in stocks market investment:

Not setting clear goals prior to investing. Goals help set you to the path of success. Before investing, try to ask yourself what your goals are. And be honest in setting your goals, it’s your own money anyway.

Don’t invest more than what you can afford to lose. As humans, we all have the tendency to be greedy. Many investors will invest all their fortune hoping to get a fat money at the end of the day. This can very well lead into a complete downfall. Always keep your costs as low as possible, Similarly, always set aside an emergency fund. As always, being prepared is half the victory.

Buying stocks based on rumors. Don’t buy stocks from a certain company just because someone told you they are about to do well in the market or that they are doing well at the moment. Make sure that you conduct your “own research” and think about the long-term potential benefits prior to choosing a company or stocks to invest in.

Letting your emotions drive your investing decisions. Some investors go anxious when they hear negative financial news and as a result they withdraw their investments hastily without doing proper research first. Don’t allow your emotions to cloud your decision that will lead to negative and most of all long-term consequences.

Pouring all your money in a single stock all at once. Stocks investment comes with inherent risk, pouring all your funds in a single stock puts you in high risk as you could end up losing all you have when that one company you invested with meet a financial downfall. Diversifying your portfolio is rather advised to minimize risk.

Not having an exit plan. A good player always has a good plan. Investing is taking risk. But you should also know when you have to exit. Having a good and well-planned exit strategy helps you manage and even limit your losses when all else fails.

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